Mexico is a leading destination for nearshoring, manufacturing, and cross-border trade—making it an attractive choice for global companies looking to hire talent in Latin America. Employers must understand and comply with Labour Laws in Mexico to operate successfully, as the country enforces these employee-centric regulations strictly. This guide outlines the legal framework, employment contracts, working hours, wages, benefits, terminations, and the role of an Employer of Record (EOR) in Mexico.
Table of Contents
- Overview of Labour Laws in Mexico
- Employment Contracts in Mexico
- Working Hours and Overtime Rules
- Minimum Wage and Salary Regulations
- Social Security and Payroll Contributions
- Leave Entitlements and Public Holidays
- Termination and Severance Rules
- Employee Benefits and Additional Perks
- Anti-Discrimination and Equal Treatment Laws
- Labour Law Compliance Tips for Global Employers
- Why Work With an Employer of Record (EOR) in Mexico
- Conclusion
- FAQs
Overview of Labour Laws in Mexico
The Federal Labour Law (Ley Federal del Trabajo) primarily governs Mexican labour law, providing a comprehensive legal framework that protects employee rights, ensures job security, and promotes social welfare. It serves as the cornerstone of all employment relationships across the country, covering everything from hiring and working conditions to benefits, dismissals, and dispute resolution.
The Labour and Social Welfare Secretariat (Secretaría del Trabajo y Previsión Social or STPS), along with local and federal labour boards, oversees the enforcement of these laws. They investigate complaints, mediate disputes, and impose penalties for non-compliance.
Key features of the Mexican labour law system include:
- Mandatory statutory benefits such as paid vacation, bonuses, profit-sharing (PTU), and social security contributions
- Strong employee protections during termination, including severance pay, just-cause requirements, and procedural safeguards
- Strict regulations on outsourcing, subcontracting, and the misclassification of workers as independent contractors
- Provisions for collective bargaining, union participation, and workplace democracy through internal labour councils
Labour laws in Mexico apply uniformly nationwide, but collective bargaining agreements (CBAs or Contratos Colectivos de Trabajo) and internal company policies may provide even more generous terms and conditions. Understanding and applying both national law and sector-specific agreements is critical for global employers operating in Mexico.
Employment Contracts in Mexico
Mexican law requires employers to document all employment contracts in writing, as they are legally mandatory. This written contract serves as a binding agreement between the employer and employee and plays a critical role in defining the terms of employment, protecting both parties, and ensuring compliance with Labour Laws in Mexico.
At a minimum, every employment contract must clearly specify the following details:
- Job title and detailed description of duties
- Work location (on-site, remote, hybrid) and defined working schedule
- Base salary and all monetary and non-monetary benefits
- Type of employment (such as permanent, fixed-term, seasonal, or training-based)
- Duration of the probationary period, if applicable, and terms under which performance will be evaluated
Common Types of Employment Contracts in Mexico
- Indefinite-Term Contracts
These are the default and most secure form of employment in Mexico. Employees under this contract type enjoy the highest degree of legal protection, particularly in termination scenarios. Unless there is a justified reason to offer a different contract type, all employment relationships are presumed indefinite by law. - Fixed-Term or Project-Based Contracts
These are permitted only when there is a justified need—such as hiring for a specific project with a known end date or to temporarily replace an employee on leave. Employers must document the rationale clearly; otherwise, the contract may be reclassified as indefinite by labour authorities. - Seasonal or Training Contracts
Designed for temporary employment tied to seasonal demand (e.g., tourism, agriculture) or to offer new employees a formal training period. These contracts must also state the time frame, objectives, and evaluation criteria.
Importance of a Written Contract
Failure to provide a written employment contract exposes employers to significant legal risk. In the absence of a formal document, the law assumes the employment relationship is indefinite and grants the worker full protections, including severance entitlements in case of dismissal. Additionally, undocumented arrangements make it difficult for employers to defend themselves in the event of a labour dispute.
To mitigate risk and ensure clarity, international companies are encouraged to partner with an Employer of Record in Mexico, which ensures that contracts are compliant with local labour standards and are issued in Spanish, the legally recognized language for employment documentation.
Working Hours and Overtime Rules
Understanding working time regulations is essential for compliance with Labour Laws in Mexico, which define specific limits for regular and overtime hours based on the type of shift and nature of work.
Standard Working Hours
Mexican law classifies work schedules into three primary categories—daytime, nighttime, and mixed shifts—each with its own maximum duration:
- Daytime shifts: Up to 8 hours per day, totaling 48 hours per week (typically from 6:00 AM to 8:00 PM)
- Nighttime shifts: Limited to 7 hours per day, totaling 42 hours per week (from 8:00 PM to 6:00 AM)
- Mixed shifts: Combine daytime and nighttime hours but must not exceed 7.5 hours per day or 45 hours per week
All employees are legally entitled to at least one full rest day per week, usually observed on Sunday. If an employee works on their rest day, they must be compensated with additional pay.
Overtime Pay
Overtime in Mexico is strictly regulated to protect employee well-being and prevent exploitation. The law permits a maximum of three overtime hours per day, for no more than three days per week.
Compensation for overtime is as follows:
- The first nine hours of overtime per week must be paid at 200% (double) the regular hourly wage
- Any overtime beyond nine hours per week must be paid at 300% (triple) the regular wage
- Work performed on Sundays or public holidays (if not part of the standard schedule) must include a 25% premium in addition to the regular or overtime pay
Employers must maintain accurate timekeeping records and ensure that overtime is voluntary and authorized. Violations can lead to inspections, fines, and labor disputes.
Given the complexities of shift regulations and premium pay obligations, global companies often partner with an Employer of Record (EOR) in Mexico to manage scheduling, time tracking, and payroll compliance seamlessly.
Suggested Read: Hire easily using Employer of Record in Mexico
Minimum Wage and Salary Regulations
Mexico has a general daily minimum wage, which varies by geographic region. As of January 2025:
- Northern Border Free Zone: MXN $375/day
- Rest of the country: MXN $250/day (projected)
Employers must:
- Pay wages in Mexican pesos
- Provide itemized payslips
- Apply appropriate tax withholdings and social security contributions
Additional compensation such as Christmas bonus (aguinaldo), profit-sharing (PTU), and vacation premium are legally required.
Social Security and Payroll Contributions
Employers in Mexico must register employees with the Mexican Social Security Institute (IMSS) and make monthly contributions toward:
- Health care and maternity
- Retirement, pension, and disability insurance
- Work-related risks and unemployment
Contribution Breakdown:
- Employer contributions: ~25%–30% of gross salary
- Employee contributions: ~2%–3% of salary
Other obligations include registration with INFONAVIT (housing fund) and SAR (retirement savings). Payroll compliance is strictly monitored.
Leave Entitlements and Public Holidays
Mexico’s labour laws mandate several types of leave to support employee well-being and ensure work-life balance.
Vacation Leave
Employees receive:
- 12 days of paid vacation after 1 year of service
- An increase of 2 days per year, up to 20 days
- A mandatory 25% vacation premium in addition to regular pay
Unused vacation must be granted, not paid out unless the employee leaves the company.
Sick Leave
- Certified by IMSS (Mexican Social Security Institute)
- IMSS pays sick leave from day 4 onward
- Employers may cover the first 3 days, based on company policy
Medical documentation is required to activate paid leave benefits.
Maternity and Paternity Leave
- Maternity: 12 weeks paid (6 before + 6 after birth)
- Paternity: 5 paid working days
- Leave is funded by social security and must be registered with IMSS
Public Holidays
Mexico observes 12 national paid holidays, including:
- Jan 1 (New Year’s)
- Feb 5 (Constitution Day)
- Sep 16 (Independence Day)
- Nov 2 (Day of the Dead)
- Dec 25 (Christmas)
Employees required to work on these days must be paid double their daily wage on top of normal pay.
Termination and Severance Rules
Terminating an employee in Mexico is a legally sensitive process and must strictly follow the guidelines outlined in the Federal Labour Law. Unlike at-will employment systems, employers must justify terminations and document the cause unless the separation is voluntary or mutually agreed upon.
Termination
Without cause is heavily regulated, and unjustified dismissal can result in significant penalties. Termination with cause is permitted but must be properly substantiated.
Valid grounds for dismissal include:
- Serious misconduct or breach of trust
- Repeated, unjustified absences
- Acts of violence, harassment, or immoral behavior
- Deliberate damage to company property
- Refusal to comply with work duties or safety regulations
In most cases, the employer must notify the employee in writing and may be required to present evidence before the local labour board. Any error in this process can lead to claims of unjustified dismissal.
Severance Pay
If an employee is terminated without just cause, Mexican law mandates the following severance compensation:
- 3 months’ salary as constitutional severance
- 20 days’ salary per year of service
- Pro-rated benefits, including:
- Unused vacation days with vacation premium
- Proportional year-end bonus (aguinaldo)
- Profit-sharing (PTU)
Even in cases of voluntary resignation or mutual separation, employers are required to pay out all pending benefits.
To avoid disputes and ensure compliance, many international companies work with an Employer of Record (EOR) in Mexico, which manages terminations according to local law and represents the employer before labour authorities if needed.
Employee Benefits and Additional Perks
Beyond the statutory entitlements mandated by Labour Laws in Mexico, many employers offer supplementary perks to remain competitive in attracting and retaining skilled talent—especially in fast-growing sectors like tech, finance, and manufacturing.
These voluntary benefits, while not legally required, play a critical role in boosting employee satisfaction, productivity, and long-term retention. Common perks offered by companies in Mexico include:
- Private medical insurance: Many employers extend healthcare coverage beyond IMSS by offering private health plans that include access to premium hospitals, specialists, and preventive care.
- Transportation or meal vouchers: These are popular fringe benefits, especially in metropolitan areas. Companies may offer pre-paid cards or monthly stipends to cover daily commuting or lunch expenses.
- Flexible schedules and remote work: In response to shifting workforce expectations, employers increasingly provide hybrid work models, flexible hours, or remote-first options—especially for roles in IT and creative sectors.
- Training and upskilling programs: Organizations often sponsor workshops, certifications, or language classes to help employees grow professionally. This not only boosts morale but also enhances workforce capabilities.
- Extra vacation days or performance-based bonuses: Some companies reward seniority or high performance with additional paid leave or incentive bonuses, going above the statutory requirements.
By tailoring benefit offerings to employee needs and preferences, businesses can significantly enhance their employer brand and reduce turnover. Partnering with an Employer of Record (EOR) in Mexico can help ensure both legal benefits and supplemental perks are administered correctly, improving compliance and overall employee experience.
Anti-Discrimination and Equal Treatment Laws
Mexican law prohibits discrimination based on:
- Gender, age, religion, ethnic origin
- Sexual orientation, disability, marital or social status
Employers must:
- Provide equal pay for equal work
- Implement anti-harassment policies
- Respect privacy and data protection rights
Breaches may lead to fines, labor lawsuits, or sanctions from the National Council to Prevent Discrimination (CONAPRED).
Labour Law Compliance Tips for Global Employers
To stay compliant with Labour Laws in Mexico, international companies should:
- Issue written contracts in Spanish
- Register employees with IMSS and INFONAVIT
- Follow proper procedures for terminations
- Maintain payroll and tax documentation
- Align HR practices with federal and local labour norms
Working with an Employer of Record (EOR) in Mexico ensures full compliance, faster hiring, and reduced legal risk.
Why Work With an Employer of Record (EOR) in Mexico
An Employer of Record services in Mexico is a trusted partner that legally hires and manages employees on your behalf, allowing global companies to operate compliantly without the burden of establishing a local legal entity. This solution is especially valuable in Mexico, where labour laws are employee-centric, complex, and vary across regions.
By partnering with an EOR, companies gain access to a turnkey employment solution that simplifies HR operations while ensuring full compliance with Labour Laws in Mexico.
Key Functions of an EOR in Mexico:
- Employment contracts and onboarding: Drafting legally compliant contracts in Spanish, tailored to role type (permanent, fixed-term, etc.), and handling all onboarding procedures
- Payroll processing and tax filings: Managing salary disbursements, tax withholdings, and contributions to Mexican social security (IMSS, INFONAVIT, SAR)
- Benefits administration: Ensuring all statutory benefits—such as vacation, bonuses, and profit-sharing—are calculated and distributed accurately
- Leave and attendance tracking: Monitoring sick leave, maternity/paternity leave, and public holidays as per federal and local laws
- Termination and severance management: Handling employee exits with proper documentation, labour board representation, and calculation of severance pay when applicable
Ideal Use Cases for Global Employers:
- Entering the Mexican market without incorporating a local legal entity
- Hiring remote or distributed teams across multiple states or cities
- Scaling operations quickly while avoiding administrative and legal complexities
- Converting contractors to full-time employees with full compliance
Partnering with Global EOR Services like Asanify helps ensure every aspect of employment—from onboarding to offboarding—is handled professionally, efficiently, and in compliance with Mexican labour law. For companies looking to explore the region, reduce risk, and stay agile, an EOR offers a strategic and cost-effective path to building teams in Mexico.
Suggested Read: Employer of Record Mexico: A Comprehensive Guide on Employer of Record 2025
Conclusion
Mexico is a strategic location for global companies thanks to its skilled labor force, cost efficiency, and proximity to the U.S. However, its labour laws are detailed, employee-focused, and strictly enforced—making compliance a top priority.
From issuing written contracts and paying statutory bonuses to managing terminations and severance, adhering to Labour Laws in Mexico is essential to avoid penalties and build a stable, productive workforce.
Working with an Employer of Record (EOR) in Mexico like Asanify allows you to hire local talent legally, manage payroll and benefits seamlessly, and stay fully compliant across all regions. Whether you’re building a nearshore team or expanding into Latin America, an EOR makes it easy to scale quickly and confidently.
FAQs
Yes, and it must specify job role, salary, and type of contract.
Typically 48 hours, with variations for night and mixed shifts.
200% of regular wages for the first 9 hours/week; 300% after that.
Aguinaldo, vacation premium, profit sharing, and social security contributions.
Yes, but you must pay full severance including 3 months’ salary and additional compensation.
Yes, there are 12 national holidays; holiday work requires double pay.
Up to 30 days for general workers; 180 days for managerial or technical roles.
Through IMSS, INFONAVIT, SAT, and local authorities; must be filed monthly.
Yes, as of 2021, remote work agreements and expense reimbursements are required.
Yes, using an Employer of Record (EOR) in Mexico allows you to legally employ talent without setting up a company.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
